The lessons of history

Nicolas Sarkozy revives some old arguments about the governance of the euro

IF YOU want to understand why Nicolas Sarkozy makes some of the leading lights in the European Union feel uneasy about the future, you must look at the past. So much about the French president is exciting and unfamiliar, in Brussels as elsewhere. It therefore seems odd to find that the big concern of some veterans is that Mr Sarkozy will drag Europe back into old quarrels they thought they had settled long ago.

Nowhere is this clearer than in Mr Sarkozy's calls for a “European economic government”. This remains a mushy concept, for all Mr Sarkozy's manic energy (in this week's theatrical coup, he invited himself to a Brussels meeting of euro-area finance ministers to persuade them to accept his plan to stretch the stability pact's timetable for eliminating France's budget deficit). As far as the Eurocrats can make out, economic government means giving elected national politicians the last word over broad swathes of EU economic policy, including the exchange rate and budget discipline, while not actually scrapping such totems as the independence of the European Central Bank (ECB).

If such a thing came about, it would certainly be new. It would also be of a piece with Mr Sarkozy's belief in the primacy of political will, his vows to save Europe from rule by technocrats and his desire that the EU should “protect” people from a brutal, globalised world. But Brussels has a long memory and knows that calls for economic government in Europe are not really new at all. Indeed, they have been a refrain of French political leaders, of right and left, for two decades.

A French history of the single currency* credits François Mitterrand with the first public call for “an economic government for Europe”, in an October 1990 speech to a Franco-German summit in Paris. In a rhetorical flourish that Mr Sarkozy might envy, Mr Mitterrand called Europe's planned single currency and central bank mere instruments that lacked a soul. When Mr Sarkozy, in a speech in Strasbourg, denounced Europe for “substituting technical expertise for political will”, old-timers could hear echoes of a battle-cry by Pierre Bérégovoy, finance minister in 1989: “no to rule by technocrats, yes to rule by democrats”. When Mr Sarkozy asks why the European single currency is not placed “at the service of growth and jobs”, and attacks the “overvaluation” of the euro, he is repeating almost verbatim two of the four conditions set by French Socialists for accepting the euro just before Lionel Jospin's surprise 1997 election victory.

This sense of déjà vu may cause EU leaders some nasty headaches. One concerns trust. During the years of wrangling over the formation of the euro, German negotiators suspected their French counterparts of usually paying only lip service to central-bank independence and budget discipline. Each time they heard calls for more political oversight, they suspected their French partners of secretly dreaming of bad old habits, from budget-busting torrents of public spending to protectionism to devaluation to boost exports.

If forced to bet, most senior EU officials now believe that Mr Sarkozy is serious about structural reforms in France. They accept the line that a French leader intent on such reforms must carry his voters with him—and that a majority of them are not ready for purist liberal orthodoxy in the style of Brussels or Frankfurt. But to some extent, the EU is being asked to undertake an exercise in clairvoyancy, giving Mr Sarkozy his political capital now before knowing if he will see his reforms through.

Nor do Brussels officials relish hearing Mr Sarkozy saying things they believe to be wrong, eg, about a strong euro choking exports. Commission officials have been handing out statistics showing how France's trade surplus with America has grown despite the weak dollar, whereas French exports to Germany have fallen even though they share a currency. That is before anyone mentions the German export boom that led Peer Steinbrück, Germany's finance minister, to declare teasingly, “I love the strong euro” as he arrived to hear Mr Sarkozy this week.

From Brussels with disdain

A second headache is the reopening of old debates about how sovereign states should align their economies and merge currencies, but at the same time remain democratically accountable to voters. Mr Sarkozy endured a rather bruising visit to Brussels. Partly this was sheer grumpiness that France is yet again using its big-power status to bend the stability-pact rules. Wouter Bos, the Dutch finance minister, pointedly told Mr Sarkozy that Europe should not be like “Animal Farm”, in which “some are more equal than others”. The truth is that big countries do not have to obey the same rules, and Mr Sarkozy will probably get away with missing the original 2010 target for eliminating his budget deficit. This is not so shocking: the pact was reformed to allow flexibility to countries undertaking structural reforms.

But Mr Sarkozy will face more resistance if he seriously pushes for greater political oversight of economic policy, starting with the ECB's mandate to concentrate on price stability. In the words of one senior Eurocrat: “This has very deep historical roots. Putting exchange rates at the service of growth comes very naturally to the French—they did it repeatedly in the past 50 years—but it sends a shudder down German spines, because it makes them think of runaway inflation.” In German memories, inflation helped to pave the way for Nazism, meaning that price instability can be a threat to democracy itself.

Does Mr Sarkozy really intend challenging this piece of EU orthodoxy which lies at the heart of the grand bargain that led to Europe's economic and monetary union? The answer to that question, as to so many others about his intentions, lies in the future. If he tries it, though, his chances of success are surely slim. And the explanation for that lies firmly in Europe's past.